Understanding the New Overtime Pay Rule

Human resources expert breaks down the Labor Department’s new overtime pay rules and what they mean to dealers. He says communication with employees will be key in the months ahead.

Hopefully you’ve perused the U.S. Department of Labor (DOL)’s final rule updating overtime regulations under the Fair Labor Standards Act (FLSA), which will impact four million workers — including some dealership personnel — when it goes live on Dec. 1, 2016. And hopefully you’re planning to audit your payroll and pay practice as part of your strategy for compliance.

Communication with your employees will be critical, as the new rules will make employees who make less than $47,476 ($913 per week) eligible for overtime pay. I write “critical” because many employees view the new rules as a huge win. They believe they will now be eligible for — and will get paid — overtime. But let me explain why they might be disappointed come Dec. 1.

Let me start with this: Many people wrongly believe employees who get a fixed salary do not get paid overtime. Under the FLSA, unless you meet special “white collar” exemption criteria, you must be paid overtime at a rate of 1.5 times your regular rate of pay. But in order to qualify for that exemption, employees must meet salary requirements, and their primary job duties must consist of executive, administrative, or professional duties as defined by the DOL. And you are still eligible if you meet one set of criteria and not the other. I recommend you check the Labor Department’s FLSA website for additional details on what job duties meet these overtime exemptions.

Now, the new rules more than double the salary threshold for overtime eligibility from $23,600 per year ($455 per week) to $47,476 annually ($913 per week). And this threshold will be updated every three years to account for inflation.